Guaranty Trust Bank Plc (GTBank) has declared a closed period ahead of the release of its audited half-year 2020 financial statements.
A corporate disclosure that was signed by the Company Secretary (Erhi Obebeduo) and sent to the Nigerian Stock Exchange said the closed period commenced on July 3rd, 2020. In line with the listing rules of the NSE, the closed period is expected to last until twenty-four hours after the bank’s financial statements have been released to the public.
Note that the implication of the closed period is that all persons with insider knowledge of the company’s affairs are hereby prohibited from trading the company’s stock.
Meanwhile, members of GTBank’s board of directors are scheduled to meet on July 22nd to consider the audited HI 2020 financial statements. A separate notice that was sent to the NSE said:
“Pursuant to the post-listing requirements of the Nigerian Stock Exchange for quoted companies, Guaranty Trust Bank Plc hereby informs you that the board of directors of our bank is scheduled to meet on Wednesday, July 22, 2020, to consider the audited financial statement for the half-year ended June 30, 2020. Issues relating to half-year dividend may also be discussed at the meeting.”
The audited financial statements for half-year 2020 shall be sent to the Central Bank of Nigeria for approval prior to being made public through the Nigerian Stock Exchange.
Recall that GTBank reported a net interest income of N64.28 billion in Q1 2020 as against N53.58 billion in Q1 2019. In the same vein, the tier-1 bank’s profit before tax grew by 2.1% to N58.2 billion, up from N57 billion in Q1 2019. Profit after tax also grew from N49.3 billion in Q1 2019 to N50 billion in Q1 2020.
GTBank closed last week’s trading on the Nigerian Stock Exchange with a share price of N20.80, according to trading reports seen by Nairametrics. Year to date, the stock has lost by more than -19%.
Nigerians borrow N3.34 trillion in one year – CBN
The document stated that the credit was stimulated by the policy on Loan-to-Deposit Ratio (LDR).
The total gross domestic credit in Nigeria increased from N15.56 trillion in May 2019 to N18.90 trillion as at June 2020. This was disclosed by the Central Bank of Nigeria via a communique issued on Thursday.
The document, which included the personal statements of members of the apex bank’s Monetary Policy Committee (MPC), stated that the credit was stimulated by the policy on Loan-to-Deposit Ratio (LDR).
— Central Bank of Nigeria (@cenbank) August 13, 2020
Drivers of the credit
Kingsley Obiora, Deputy Governor, CBN, explained that the credits were driven especially by demands from the manufacturing sector, consumer credit, general commerce, information and communication, and agriculture, among others. He said:
“Under the circumstances, the financial system has maintained a sound and stable position, following effective interventions by the CBN.
“Short-term interest rates continue to suggest some surfeit in the system with average Open Buy Back (OBB) and inter-bank call rates rising to 5.75 and 11.31 percent in June 2020, from 5.22 and 5.80% in May 2020, respectively.
“Non-performing loans (NPLs) decreased to 6.4% at the end of June 2020, compared to 9.4 percent in the corresponding period of 2019, reflecting recoveries, write-offs and disposals.”
He, however, added that despite the improvements, the economy continued to face significant headwinds to a robust recovery, as the number of COVID-19 cases exceeded 36,000 cumulatively, and continued to rise.
“The headline inflation rate increased slightly to 12.56% in June from 12.40% in May, with food inflation at 15.18%.
“Furthermore, 87% of households owning non-farm businesses have highlighted difficulties in raising money for their enterprises,” he added.
Obiora stated that it was clear that the economy faced an uncertain path, with long-lasting consequences for the livelihoods of many.
The decisive efforts of governments and central banks across the world have provided a strong foundation for the current recovery. However, it would be remiss to assume that the crisis is now over, especially as there remain many unknowns regarding the virus.
CBN says 22 banks to restructure over 35,000 loans due to COVID-19
This is seen as part of measures by the apex bank to curb the rise in non-performing loans.
The Central Bank of Nigeria (CBN) has disclosed that 22 Nigerian banks submitted requests to restructure 35,639 credit facilities of businesses that were impacted by the coronavirus pandemic, as of July 20, 2020.
This represents 41.92% of the total industry loan portfolio and has partly reflected in improved industry risk profile, as non-performing loans ratio declined from 6.6% in April 2020 to 6.4% in June 2020.
The disclosure is part of the personal statement made by the CBN Deputy Governor, Financial System, Aisha Ahmad, during the last Monetary Policy Committee (MPC) on July 20, 2020.
She said that the net interest margin remained quite robust despite lower interest income, due to much lower industry interest expense, as deposit rates continued to decline.
This is seen as part of measures by the apex bank to curb the rise in non-performing loans in the system due to the impact of the coronavirus pandemic and low oil prices.
Also, as part of the drive to reduce non-performing loans, Nairametrics reported that the CBN had given approval to banks to debit bank accounts of chronic loan defaulters with other banks. They were given the power to debit loans and accrued interests due from bank accounts of loan defaulters across the banking system.
She also said, “The loan-to-deposit ratio (LDR), Global Standing Instruction, streamlining of access to Open Market Operations securities and other complementary measures have been strong tailwinds which have strengthened intermediation via increased lending to the key sectors such as manufacturing, agriculture and consumer markets (gross credit grew by an additional N300 billion from N18.6 trillion to N18.9 trillion between end April and end June 2020 respectively) and lower market lending rates, which have insulated the financial system from the worst impact of the pandemic.”
Aisha Ahmad explained that these efforts were supported by various ongoing CBN interventions to reduce the impact of the coronavirus pandemic on businesses and households.
Some of these interventions include the N50 billion SME and household facility, out of which N49.195 billion has been disbursed to over 92,000 beneficiaries; the N100 billion healthcare facility, and N1 trillion manufacturing and agricultural interventions alongside other significant interventions.
In her note, she said sustained credit to the real economy, particularly for SMEs and households, would be crucial to economic recovery, therefore maintaining banking industry liquidity would be paramount.
Fitch forecasts that banks’ earnings will be hit hard by CBN’s CRR policy, others
The CRR debits on Nigerian banks have exceeded the N2 trillion mark in 2020 alone.
Foremost International Rating Firm, Fitch Ratings, has forecast that punitive policies by the Central Bank of Nigeria (CBN), especially the Cash Reserve Ratio (CRR) debits on Nigerian banks, will negatively impact on their earnings.
According to the rating firm, this is coming at a time when most other countries are giving banks extra leeway to fight the economic fallout of the coronavirus.
The Senior Director for Europe, Middle East and Africa at Fitch, Mahin Dissanayake, in an interview, said:
“The Central Bank of Nigeria has been highly interventionist. Where peers like South Africa and Kenya followed the global trend of giving banks more room to lend, Nigeria hasn’t budged. Instead, it stuck with a cash reserve ratio that compels lenders to park 27.5% of their deposits with the central bank.’
“The CRR is unique and hugely punitive. The regulation is aimed at reducing the amount of money in the financial system to keep inflation in check.’’
Dissanayake pointed out that keeping those huge idle cash with the CBN in a non-interest yielding account puts a lot of pressure on the earnings of the banks, as they would have been put to better use through ventures such as lending. The inability of the banks to meet the requirements of the apex bank results in the debiting of the banks’ accounts with the shortfall.
The CBN also debits the accounts of banks who fail to meet the 65% loan to deposit ratio (LDR) regulation, a policy which is aimed at stimulating credit in the economy.
The CRR debits on Nigerian banks have exceeded the N2 trillion mark in 2020 alone, some of which are speculated to be aimed at reducing the capacity of the lenders to participate in the foreign exchange market and as a result reducing the pressure on the naira.
According to an earlier report from Nairametrics, some analysts suggest that the CBN debits the accounts of banks arbitrarily without adhering to the 22.5% CRR, just to manage the liquidity in the system.
Dissanayake disclosed that enforcement of these policies and penalties have caused an effective hit on capital to between 40% and 50%.
He said, “Nigerian banks compared to other markets operate in a volatile environment. The banks have to deal with economic shocks, short credit cycles and persistent problems in the oil sector. They also have to deal with policy actions, policy uncertainty and regulatory risks.”
He, however, said that the positive side of this is that the strong revenue-generating capacity in a large Nigerian economy allows the banks to absorb the higher cost of risk even when income from interest charges on loans deteriorate.
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The financial results for the first half of the year saw Nigerian banks record trading and foreign exchange revaluation gains which had neutralized the lower yields on government bond holdings, slower loan growth and fewer transactions from customers due to the effect of the coronavirus pandemic.
Dissanayake forecasted an estimated 20% decline in revenue, with a decline as well in profitability. The degree of decline in profitability will depend on the extent of loan impairment charges and the size of trading and translation gains.